Undue hardship under FEMA pre-deposit proviso includes strong prima facie case, justifying partial waiver on equitable factors.

The expression "undue hardship" in the pre-deposit proviso to Section 19 of FEMA is not confined to financial inability; it may also arise where insisting on full deposit would be disproportionate despite a strong prima facie case. The discretion to waive pre-deposit must first assess the strength of the prima facie case and then consider balance of convenience, financial capacity, irreparable loss, and protection of recovery interests. Applying these factors, the court found a reasonably strong prima facie case but also accepted the need for revenue protection, and therefore directed only a partial waiver of pre-deposit.

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Issues: Whether the expression "undue hardship" in the proviso to Section 19 of the Foreign Exchange Management Act, 1999 permits dispensation of pre-deposit where the appellant shows a strong prima facie case even in the absence of financial hardship.

Analysis: The expression "undue hardship" was construed as including a burden that is disproportionate to the applicant's fault or liability, and not as being confined only to financial difficulty. The discretion to waive pre-deposit was held to depend first on the existence of a prima facie case; where that case is strong, insisting on full deposit may itself amount to undue hardship. The quantum of waiver is then to be fixed by considering the balance of convenience, financial capacity, irreparable loss, and the need to safeguard recovery. Applying these principles, the petitioner was found to have a reasonably strong prima facie case, but the circumstances also justified some safeguard in favour of revenue recovery.

Conclusion: The petitioner was entitled to partial waiver of the pre-deposit, and the direction to insist upon the full amount was modified to a deposit of 50% of the penalty.

Ratio Decidendi: "Undue hardship" in a statutory pre-deposit proviso is not limited to financial inability; it may also arise where the appellant discloses a strong prima facie case and the insistence on full deposit would be disproportionate, in which event the authority must exercise discretion on relevant equitable factors.

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